Brock Pierce, co-founder of Tether and a prominent figure in the cryptocurrency industry, is currently facing significant legal challenges on multiple fronts. As Tether prepares to defend itself against a lawsuit brought by bankrupt crypto lender Celsius, Pierce is also entangled in separate legal disputes with business partners in Puerto Rico, where his ambitious plans to create a crypto haven have encountered serious setbacks.
Tether Prepares to Defend Against “Shakedown” Lawsuit by Bankrupt Crypto Lender Celsius
Tether, the issuer of the world's largest stablecoin, USDT, has vowed to robustly defend itself against what it calls a “shakedown” lawsuit brought by the bankrupt crypto lender Celsius. The lawsuit, which emerged from the ashes of Celsius' downfall, is poised to become a significant legal battle with potential ramifications across the crypto industry.
Filed by Celsius in the U.S. Bankruptcy Court of the Southern District of New York, the lawsuit demands that Tether relinquish 57,428.64 Bitcoin (BTC) or, alternatively, award the “present value of all Bitcoin,” a sum that amounts to approximately $3.3 billion at current market prices. The claim stems from a loan agreement between the two companies, which Celsius argues was manipulated by Tether during the crypto market crash in mid-2022.
According to the court filing, Celsius alleges that Tether engaged in “preferential and fraudulent transfers” of Bitcoin in the ninety-day period leading up to Celsius’ bankruptcy. The lawsuit claims that Tether, anticipating Celsius’ impending bankruptcy, took steps to insulate itself by demanding and receiving significant amounts of new collateral to improve its financial position, all at Celsius’ expense.
Tether has responded to these allegations with fierce denial, asserting that the lawsuit is an attempt to reclaim Bitcoin that was lawfully sold to cover Celsius’ obligations. In a statement on its website, Tether described the lawsuit as baseless, emphasizing that the Bitcoin in question was liquidated at Celsius’ direction and with Celsius’ consent in June 2022, when the market was in freefall.
“This lawsuit incredibly now seeks the return of approximately $2.4 billion worth of BTC from Tether, despite the BTC being liquidated at Celsius’ direction and with Celsius’ consent at June 2022 prices,” Tether stated. The company did not elaborate on how it arrived at the $2.4 billion figure but maintained that it had acted in accordance with the loan agreement between the two entities.
At the heart of the dispute is the timing and process of the Bitcoin liquidation. Celsius contends that Tether applied Celsius’ Bitcoin against its obligations at an average price of $20,656.88 per Bitcoin, which was significantly lower than Bitcoin’s market closing price of $22,487.39 on June 13, 2022. This, Celsius argues, resulted in an unfair loss to its estate, and as such, the Bitcoin or its equivalent value should be returned.
Additionally, Celsius is seeking $100 million in damages, alleging breaches of contract on Tether’s part. The lender claims that Tether’s actions during the market crash were motivated by self-preservation rather than adherence to the terms of their agreement.
Tether’s Position: A Defense of Contractual Rights
Tether, however, stands firm in its position that it acted within its contractual rights. The company stated that when the market crashed, the agreement required Celsius to post additional collateral to avoid the liquidation of its Bitcoin. When Celsius failed to provide the necessary collateral, it directed Tether to liquidate the Bitcoin collateral that Tether held.
Tether’s CEO, Paolo Ardoino, took to X (formerly Twitter) to express his confidence in Tether’s legal standing. “This baseless lawsuit is trying to claim that we should give back the Bitcoin that was sold to cover Celsius’ position,” Ardoino wrote. “There are plenty of flaws in the claimant’s filing, and we're very confident in the solidity of our contract and our actions... This lawsuit will be fought till the end. It's important to set an example on behalf of the entire industry that shameless money grabs will not work.”
The outcome of this lawsuit could have significant implications for the cryptocurrency industry, particularly regarding how loan agreements and collateral management are handled in volatile markets. If Celsius were to prevail, it could set a precedent for how crypto assets are treated in bankruptcy proceedings, potentially leading to more stringent regulations and oversight.
However, Tether appears confident that it will emerge victorious. The company noted that its consolidated equity was nearly $12 billion as of June 30, 2024, suggesting that even in the unlikely event that the lawsuit were to succeed, Tether’s financial position—and by extension, the stability of USDT—would remain unaffected.
As Celsius' bankruptcy case officially closed following a court-approved reorganization plan in November, this new litigation against Tether adds another layer of complexity to the saga. Both parties are gearing up for what could be a lengthy and contentious legal battle, with billions of dollars at stake and the eyes of the crypto world watching closely.
This case serves as a stark reminder of the risks inherent in the rapidly evolving cryptocurrency landscape, where the interplay of market volatility, legal frameworks, and financial agreements can lead to high-stakes disputes. As the legal process unfolds, it will likely provide valuable insights into the intersection of traditional legal principles and the unique challenges posed by digital assets.
Brock Pierce's Puerto Rican Dream Falters Amid Legal Disputes and Financial Woes
Brock Pierce, a former child actor turned cryptocurrency mogul, has long been a prominent figure in the digital currency world. As a co-founder of Tether, the world's largest stablecoin by market capitalization, and an early investor in various crypto ventures, Pierce amassed significant wealth, with his net worth once estimated at around $1 billion. However, recent reports suggest that Pierce's ambitious efforts to transform Puerto Rico into a cryptocurrency haven have hit a series of serious roadblocks, leaving the entrepreneur entangled in legal disputes and financial difficulties.
Pierce's journey from Hollywood to the cryptocurrency world is nothing short of remarkable. As a child actor, Pierce starred in popular films like "The Mighty Ducks" and "First Kid." However, his real fame came later when he became one of the earliest and most successful investors in the burgeoning cryptocurrency industry. His involvement in projects like Tether and Blockchain Capital catapulted him into the upper echelons of the crypto elite, where he quickly became known for his vision of a blockchain-powered future.
In 2017, Pierce made a significant move by relocating from the mainland United States to Puerto Rico, lured by the island's favorable tax incentives under Act 60. This law allows individuals and businesses to enjoy substantial tax breaks, including a 0% tax rate on capital gains, provided they establish residency on the island. Pierce envisioned Puerto Rico as a hub for crypto innovation, where like-minded entrepreneurs could build a new financial system unburdened by the regulations and restrictions of traditional financial centers.
Despite his initial successes, Pierce's grand vision for Puerto Rico has recently begun to unravel. According to a report by the New York Times, Pierce is currently embroiled in a series of legal disputes with former business partners, casting a shadow over his once-promising ventures on the island.
One of the most high-profile of these disputes involves the W Hotel on Vieques, a small island off Puerto Rico's eastern coast. The W Hotel was once a crown jewel of the Caribbean, attracting tourists from around the world. However, it has remained closed since Hurricane Maria, a devastating Category 5 storm that struck the region in 2017. Pierce purchased the hotel with the intention of restoring it to its former glory, but his efforts have been met with numerous challenges.
The most significant of these challenges comes from Mr. Lipsey, a logistics mogul who lent Pierce $4 million to complete the purchase of the remaining part of the hotel. According to court records, Lipsey has accused Pierce of violating the terms of their agreement by misappropriating the funds for personal use, including hosting an extravagant party. As a result, Lipsey seized control of the W Hotel, leaving Pierce out in the cold.
The legal wrangling did not end there. Lipsey also accused Pierce of attempting to kidnap him at another hotel, a claim that Pierce has vehemently denied. The allegations have only further complicated the situation, as both parties are now engaged in discussions about a possible settlement.
Local Backlash and Failed Promises
Pierce's troubles extend beyond the courtroom. His efforts to turn Puerto Rico into a "crypto mecca" have not been well received by the local population, who view his activities as exploitative and self-serving. Critics argue that Pierce and other crypto entrepreneurs have treated the island as their personal playground, taking advantage of tax incentives while contributing little to the local economy or addressing the pressing needs of the Puerto Rican people.
Many locals are particularly disillusioned by the fact that Pierce's ventures have failed to deliver on their promises. The W Hotel, once a symbol of hope for the island's economic recovery, remains shuttered, and other projects have either stalled or failed to materialize. The combination of legal challenges, unpaid bills, and broken promises has left a bitter taste in the mouths of many Puerto Ricans who had initially welcomed the influx of crypto wealth with optimism.
As Brock Pierce navigates these legal and financial challenges, questions about his legacy and the future of his projects in Puerto Rico loom large. What was once a vision of a blockchain-powered paradise now appears to be in jeopardy, with Pierce's reputation suffering as a result. The legal battles and allegations against him have cast a long shadow over his efforts to position himself as a leader in the crypto space.
For Pierce, the stakes are high. His ability to settle these disputes and salvage his projects in Puerto Rico may determine whether he can regain his footing in the crypto world or whether his ventures on the island will become cautionary tales of ambition gone awry.
